[Federal Register: July 6, 2007 (Volume 72, Number 129)]
[Rules and Regulations]
[Page 36871-36873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jy07-8]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 53 and 54
[TD 9334]
RIN 1545-BG20
Requirement of Return and Time for Filing
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final and temporary regulations
providing guidance relating to the requirement of a return to accompany
payment of excise taxes under section 4965 of the Internal Revenue Code
(Code) and the time for filing that return. These regulations affect a
broad array of tax-exempt entities, including charities, state and
local government entities, Indian tribal governments and employee
benefit plans, as well as entity managers of these entities. This
action is necessary to implement section 516 of the Tax Increase
Prevention and Reconciliation Act of 2005. The text of the temporary
regulations also serves as the text of the proposed regulations set
forth in the Proposed Rules section in this issue of the Federal
Register.
DATES: Effective date. These regulations are effective on July 6, 2007.
Applicability date. For dates of applicability, see Sec. Sec.
53.6071-1T(g) and 54.6011-1T(c) of these regulations.
FOR FURTHER INFORMATION CONTACT: Galina Kolomietz, (202) 622-6070,
Michael Blumenfeld, (202) 622-1124, or Dana Barry, (202) 622-6060 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
The Tax Increase Prevention and Reconciliation Act of 2005, Public
Law 109-222 (120 Stat. 345) (TIPRA), enacted on May 17, 2006, added
section 4965 to the Code. Section 4965 affects a broad array of tax-
exempt entities as defined in section 4965(c). Tax-exempt entities
described in section 4965(c)(1), (2), or (3) (referred to herein as
``non-plan entities'') include entities described in section 501(c),
religious or apostolic associations or corporations described in
section 501(d), entities described in section 170(c), including states,
possessions of the United States, the District of Columbia, political
subdivisions of states and political subdivisions of possessions of the
United States (but not including the United States), and Indian tribal
governments within the meaning of section 7701(a)(40). Tax-exempt
entities described in section 4965(c)(4), (c)(5), (c)(6), or (c)(7)
(referred to herein as ``plan entities'') include tax-favored
retirement plans, individual retirement arrangements, and savings
arrangements described in section 401(a), 403(a), 403(b), 529, 457(b),
408(a), 220(d), 408(b), 530 or 223(d).
Section 4965 imposes two new excise taxes, one on the tax-exempt
entity (the entity-level tax) and the other on certain of the tax-
exempt entity's managers (the manager-level tax). The entity-level tax
is imposed on non-plan entities that are parties to prohibited tax
shelter transactions. The entity-level tax does not apply to plan
entities. Prohibited tax shelter transactions are transactions that are
identified by the IRS as ``listed transactions'' (within the meaning of
section 6707A(c)(2)) and reportable transactions that are confidential
transactions or transactions with contractual protection (as defined in
section 6707A(c)(1) and Sec. 1.6011-4(b) of this chapter).
The entity-level tax applies to each taxable year during which the
non-plan entity is a party to a prohibited tax shelter transaction and
has net income or proceeds attributable to the transaction which are
properly allocable to that taxable year. The amount of the entity-level
tax depends on whether the non-plan entity knew or had reason to know
that the transaction was a prohibited tax shelter transaction at the
time the entity became a party to the transaction. If the non-plan
entity did not know (and did not have reason to know) that the
transaction was a prohibited tax shelter transaction at the time the
entity became a party to the transaction, the tax is the highest rate
of tax under section 11 (currently 35 percent) multiplied by the
greater of: (i) The entity's net income with respect to the prohibited
tax shelter transaction (after taking into account any tax imposed by
Subtitle D, other than by this section, with respect to such
transaction) for the taxable year or (ii) 75 percent of the proceeds
received by the entity for the taxable year that are attributable to
such transaction. If the non-plan entity knew or had reason to know
that the transaction was a prohibited tax shelter transaction at the
time the entity became a party to the transaction, the tax is the
greater of (i) 100 percent of the entity's net income with respect to
the transaction (after taking into account any tax imposed by Subtitle
D, other than by this section, with respect to such transaction) for
the taxable year or (ii) 75 percent of the
[[Page 36872]]
proceeds received by the entity for the taxable year that are
attributable to such transaction. In the case of a transaction that
becomes a prohibited tax shelter transaction by reason of becoming a
listed transaction after the non-plan entity has become a party to such
transaction (subsequently listed transactions), the amount of tax is
based on the net income or proceeds attributable to such transaction
that are properly allocable to the period beginning on the date the
transaction became listed or the first day of the entity's taxable
year, whichever is later. No entity-level tax applies to any income or
proceeds that are properly allocable to a period ending on or before
August 15, 2006.
The manager-level tax is imposed on entity managers (as defined in
section 4965(d)) of all tax-exempt entities described in section
4965(c) who approve the entity as a party (or otherwise cause the
entity to be a party) to a prohibited tax shelter transaction and know
or have reason to know that the transaction is a prohibited tax shelter
transaction. In the case of non-plan entities, the term entity manager
means the person with authority or responsibility similar to that
exercised by an officer, director or trustee, and, with respect to any
act, the person having authority or responsibility with respect to such
act. In the case of plan entities, the term entity manager means the
person who approves or otherwise causes the entity to be a party to the
prohibited tax shelter transaction. An individual beneficiary
(including a plan participant) or owner of the tax-favored retirement
plans, individual retirement arrangements, and savings arrangements
described in section 401(a), 403(a), 403(b), 529, 457(b), 408(a),
220(d), 408(b), 530 or 223(d), may be liable as an entity manager if
the individual beneficiary or owner has broad investment authority
under the arrangement. The amount of the manager-level tax is $20,000
for each approval or other act causing the entity to be a party to a
prohibited tax shelter transaction. The manager-level tax applies
separately to each entity manager.
These final and temporary regulations are being issued concurrently
with proposed regulations under sections 4965, 6033(a)(2) and 6011(g)
published elsewhere in the Federal Register.
Explanation of Provisions
The regulations provide that non-plan entities (including exempt
organizations and governments) that are liable for section 4965 excise
taxes and entity managers of non-plan entities who are liable for
section 4965 excise taxes as entity managers are required to file a
return on Form 4720, ``Return of Certain Excise Taxes Under Chapters 41
and 42 of the Internal Revenue Code.'' The entity return is due on or
before the date the non-plan entity's annual return under section
6033(a)(1) (for example, Form 990, ``Return of Organization Exempt From
Income Tax'') is due, if the non-plan entity is required to file such a
return. In all other cases, the entity return is due on or before the
15th day of the fifth month after the end of the non-plan entity's
accounting period for which the liability under section 4965 was
incurred. In the case of a non-plan entity manager, the entity manager
return is due on or before the 15th day of the fifth month following
the close of the manager's taxable year during which the entity entered
into a prohibited tax shelter transaction.
The regulations also provide that entity managers of plan entities
who are liable for section 4965 taxes as entity managers are required
to file a return on Form 5330, ``Return of Excise Taxes Related to
Employee Benefit Plans.'' For section 4965 taxes, the Form 5330 is due
on or before the 15th day of the fifth month following the close of the
manager's taxable year during which the entity entered into a
prohibited tax shelter transaction.
The regulations provide a transition rule that returns of section
4965 taxes that are or were due on or before October 4, 2007 will be
deemed timely if the return is filed and the tax is paid before that
date.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. For the
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6),
refer to the Special Analyses section of the preamble to the cross-
referencing notice of proposed rulemaking published in the Proposed
Rules section in this issue of the Federal Register. Pursuant to
section 7805(f) of the Code, these regulations have been submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on business.
Drafting Information
The principal authors of these regulations are Galina Kolomietz and
Dana Barry, Office of Division Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities). However, other personnel from the IRS
and the Treasury Department participated in their development.
List of Subjects
26 CFR Part 53
Excise taxes, Foundations, Investments, Lobbying, Reporting and
recordkeeping requirements.
26 CFR Part 54
Excise Taxes, Pensions, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR parts 53 and 54 are amended as follows:
PART 53--FOUNDATION AND SIMILAR EXCISE TAXES
0
Paragraph 1. The authority citation for part 53 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 53.6011-1 [Amended]
0
Par. 2. In Sec. 53.6011-1, paragraph (b) is amended by:
0
1. Removing from the first sentence, the language ``or 4958(a),'' and
adding ``4958(a), or 4965(a),'' in its place.
0
2. Removing from the last sentence, the language ``or 4958(a),'' and
adding ``4958(a), or 4965(a),'' in its place.
0
Par. 3. Section 53.6071-1 is amended by adding and reserving paragraph
(g) and adding paragraph (h) to read as follows:
Sec. 53.6071-1 Time for filing returns.
* * * * *
(g) [Reserved]. For further guidance, see Sec. 53.6071-1T(g).
(h) Effective/applicability date. For the applicability date of
paragraph (g) of this section, see Sec. 53.6071-1T(h).
0
Par. 4. Section 53.6071-1T is added to read as follows:
Sec. 53.6071-1T Time for filing returns (temporary).
(a) through (f) [Reserved]. For further guidance, see Sec.
53.6071-1(a) through (f).
(g) Taxes imposed with respect to prohibited tax shelter
transactions to which tax-exempt entities are parties--(1) Returns by
certain tax-exempt entities. A Form 4720, ``Return of Certain Excise
Taxes Under Chapters 41 and 42 of the Internal Revenue Code,'' required
by Sec. 53.6011-1(b) for a tax-exempt entity described in section
4965(c)(1), (c)(2) or (c)(3) that is a party to a prohibited tax
shelter transaction and is liable for tax imposed by section 4965(a)(1)
shall be filed on or before the
[[Page 36873]]
due date (not including extensions) for filing the tax-exempt entity's
annual information return under section 6033(a)(1). If the tax-exempt
entity is not required to file an annual information return under
section 6033(a)(1), the Form 4720 shall be filed on or before the 15th
day of the fifth month after the end of the tax-exempt entity's taxable
year or, if the entity has not established a taxable year for Federal
income tax purposes, the entity's annual accounting period.
(2) Returns by entity managers of tax-exempt entities described in
section 4965(c)(1), (c)(2) or (c)(3). A Form 4720, required by Sec.
53.6011-1(b) for an entity manager of a tax-exempt entity described in
section 4965(c)(1), (c)(2) or (c)(3) who is liable for tax imposed by
section 4965(a)(2) shall be filed on or before the 15th day of the
fifth month following the close of the entity manager's taxable year
during which the entity entered into the prohibited tax shelter
transaction.
(3) Transition rule. A Form 4720, for a section 4965 tax that is or
was due on or before October 4, 2007 will be deemed to have been filed
on the due date if it is filed by October 4, 2007 and if all section
4965 taxes required to be reported on that Form 4720 are paid by
October 4, 2007.
(h) Effective/applicability date--(1) In general. Paragraph (g) of
this section is applicable on July 6, 2007.
(2) Expiration date. Paragraph (g) of this section will cease to
apply on July 6, 2010.
PART 54--PENSION EXCISE TAXES
0
Par. 5. The authority citation for part 54 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 6. Section 54.6011-1 is amended by adding and reserving paragraph
(c) and adding paragraph (d) to read as follows:
Sec. 54.6011-1 General requirement of return, statement, or list.
* * * * *
(c) [Reserved]. For further guidance, see Sec. 54.6011-1T(c).
(d) Effective/applicability date. For the applicability date of
paragraph (c) of this section, see Sec. 54.6011-1T(d).
0
Par. 7. Section 54.6011-1T is amended as follows:
0
1. The undesignated text is designated as paragraph (a) and a paragraph
heading is added.
0
2. Paragraph (b) is added and reserved.
0
3. Paragraphs (c) and (d) are added.
Sec. 54.6011-1T General requirement of return, statement or list
(temporary).
(a) Tax on reversions of qualified plan assets to employer. * * *
(b) [Reserved].
(c) Entity manager tax on prohibited tax shelter transactions--(1)
In general. Any entity manager of a tax-exempt entity described in
section 4965(c)(4), (c)(5), (c)(6), or (c)(7) who is liable for tax
under section 4965(a)(2) shall file a return on Form 5330, ``Return of
Excise Taxes Related to Employee Benefit Plans,'' on or before the 15th
day of the fifth month following the close of such entity manager's
taxable year during which the entity entered into the prohibited tax
shelter transaction, and shall include therein the information required
by such form and the instructions issued with respect thereto.
(2) Transition rule. A Form 5330, ``Return of Excise Taxes Related
to Employee Benefit Plans,'' for an excise tax under section 4965 that
is or was due on or before October 4, 2007 will be deemed to have been
filed on the due date if it is filed by October 4, 2007 and if the
section 4965 tax that was required to be reported on that Form 5330 is
paid by October 4, 2007.
(d) Effective/applicability date--(1) In general. Paragraph (c) of
this section is applicable on July 6, 2007.
(2) Expiration date. Paragraph (c) of this section will expire on
July 5, 2010.
Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
Approved: June 21, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E7-12901 Filed 7-5-07; 8:45 am]
BILLING CODE 4830-01-P